Year

2005

Degree Name

Doctor of Philosophy

Department

School of Accounting and Finance - Faculty of Commerce

Abstract

Outsourcing in the public sector has been an issue of much debate in the Australian public sector over the last one and a half decades. Following a decade long experimentation elsewhere in the wake of public sector reforms, primarily in Western and other OECD countries, it has impacted upon various tiers of the Australian Public Sector since the late eighties. The reasons for such debates centred on the role of government in serving its citizens from a shrinking revenue base and rising unemployment levels. After the early 1990s management theorists have challenged the efficiencies of governments. Government production has been labelled as inefficient and ineffective. To redress these allegations, various countries adopted measures to lift the performance of the public sector. Some of the measures were administrative in nature, while others directly impacted the operational aspects of government service provision. As a result, intellectual currents flowed back and forth among countries about their practices to address the inefficiencies. Overall, the tiers of governments were scrutinised for their performance. Local governments in different countries were seen to have addressed these concerns more than any other level of government. This is evidenced by the prevalence of a rich body of literature on contracting out in local government contexts. Ironically, the outsourcing practices in local governments lacked the rigour demanded by critics. Allegations were made that the methods for evaluating government efficiency and of reforms for making sourcing decisions are historically flawed. Though these did not bear much on the decisions of the public servants in the past, they mattered a lot in recent times, especially in the wake of declining revenue bases in local government. The reform advocates demanded inputs from accounting professionals in making their administrative decisions. In particular, outsourcing of big-ticket items over multi-year period attracted the attention of local government bodies. So there have been increasing calls for more research into outsourcing decisions using contemporary managerial and accounting practices. The role of local government management accountants suddenly became prominent within their organisations. This thesis has addressed this gap in the literature by introducing a holistic framework for pricing government production and evaluating bid decisions. Attempts have been made to use theory triangulation, drawing on literature from public administration, economics, management accounting and government financial management. The conceptual framework of the thesis extends research to date by bringing in the theoretical and practical rigour for competitively pricing internal bids and making decisions. A case study method has been adopted to collect and analyse data from primary and secondary sources. In analysing data, the triangulation approach has been used to reinforce the findings and validate the conclusions reached in this thesis. A local government city council in New South Wales has been used to conduct the case study. The major findings of this thesis are that outsourcing practices in the researched organisation reflected two distinct theoretical perspectives, the transaction cost theory (TCE), and the new managerialism (which descended from Public Choice Theory Overall, outsourcing practices in the researched organisation were not prevalent. But after the introduction of public sector reforms, the processes of sourcing decisions were much more formalised, and the managerial accountability was made more rigorous. Finally, overhead allocation played a vital role in pricing internal bids in both cases. Especially, the role of overhead allocation in bid pricing emerged as a dominant theme after the introduction of public sector reform in the researched organisation. It required the introduction of private sector and commercial style accounting and management practices. The researched organisation changed its Accounting Information Systems in general, and Management Accounting Systems in particular, across the board, borrowing private sector managerial and accounting expertise. It was also revealed that strategic management accounting had enormous potential to reshape the accounting and operating environment of the researched organisation.

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Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong.